HCMC street retail spaces vacant despite rent cuts

Street retail spaces in Ho Chi Minh City, Vietnam's economic hub, continue to face persistent vacancies, as they struggle to compete with modern retail spaces that offer a wider array of goods and services.

According to the HCMC Statistics Office, the city’s total retail sales of goods and services reached VND317 trillion ($12.2 billion) in Q1, up 14% year-on-year.

Retail goods alone accounted for 46% of that figure, totaling VND147 trillion ($5.66 billion), underscoring strong consumer demand.

A recent report by consultancy Savills Vietnam shows that modern retail formats, including shopping malls, retail podiums, department stores, and supermarkets, maintained a high occupancy rate of 94% in Q1, up two percentage points from the previous year.

The rise was fueled by strong demand in the food and beverage (F&B), entertainment, home appliance, and furniture sectors, as well as solid absorption at newly launched projects.

Notable retail developments such as the Thiso Mall Sala, Parc Mall, Vincom Mega Grand Park, and Centre Mall Vo Van Kiet all opened with occupancy rates above 70%. Particularly, Centre Mall Vo Van Kiet in District 6 achieved an impressive 88% occupancy shortly after opening.

Tenants leasing as much as over 500 square meters accounted for more than one-third of the leased space, with key demand coming from education, health and beauty, home appliances, and furniture brands.

In contrast, street retail spaces continue to face headwinds. Occupancy rates have yet to recover to pre-pandemic levels, despite rental rates dropping 10-20% from the 2019 levels.

Landlords are offering a range of incentives, from fixed rent periods and flexible payment terms to reduced deposits and more lenient lease durations, but vacant storefronts remain common, even in prime and high-footfall areas.

Thanh Huong, senior manager of research at Savills HCMC, noted that Vietnam’s retail landscape is undergoing a significant transformation, driven largely by changes in consumer behavior and operational shifts within the industry.

“The shift began during the pandemic, when social distancing measures pushed consumers toward online shopping. People quickly became accustomed to the convenience and cost savings of e-commerce.

Even as the economy recovers, many have maintained those habits. This marks a long-term behavioral change that is directly impacting demand for traditional retail space,” she explained.

Huong emphasized that both evolving consumer preferences and operational differences between street retail and malls are steering retailers toward the latter.

“When weighing options between street-facing stores and malls, most retail brands now favor malls. The two models differ greatly in terms of structure and operation,” she said.

Shopping malls become preferred choice

Huong pointed out that street-front properties often suffer from inconsistent rental practices and a lack of professional management, with lease terms subject to the discretion of individual landlords. This can create instability and unpredictability for tenants.

In contrast, shopping malls offer structured management, transparent pricing, stable environments, and consistently high foot traffic thanks to strategic planning, prime locations, and integrated infrastructure. These factors help retailers better manage risk and control operational costs.

Beyond operational efficiency, malls also serve as powerful branding tools. While they may not always generate higher sales immediately, their strong customer flow enhances brand visibility and credibility. Meanwhile, street-facing stores, especially those outside key locations, often lack the same marketing impact.

“With street retail, customers must actively seek out the brand. In malls, they encounter brands passively - through window displays and natural foot traffic — creating organic exposure even before a specific purchase need arises,” she added.

Facing ongoing economic uncertainty, many retailers are reassessing their store portfolios and rebalancing costs. Given the operational advantages and customer appeal, modern retail, particularly shopping malls, is increasingly becoming the format of choice in strategies aimed at maximizing performance.

Looking ahead, Huong forecast that five new projects slated for completion by year-end will add 66,244 square meters of retail space to the market. Of this, 52% will be concentrated in central areas, driven by two key developments: Marina Central Tower and Lancaster Legacy.

However, limited land availability will impact supply development and pose challenges to the expansion plans of international brands and overall market prospects, particularly in central areas, she noted.